Trade credit insurance (also known as credit insurance, business credit insurance or export credit insurance) is an insurance policy and risk management product that covers the payment risk resulting from the delivery of goods or services.
The trade credit insurance provider should partner with your organization to develop a strategy and a policy to identify your organization exposure to risk and customize a policy based on the level of risk. Trade credit is the credit extended to you by suppliers who let you buy now and pay later. Since your needs and financial situation change over time, it is important to understand and review your insurance policies on a regular basis to decide if the same policies are still right for you.
Trade involves the exchange of goods or services for money or other items of value. Credit insurance is a product designed to protect what is most likely your companys largest asset, its accounts receivable. Also, your business credit scores and ratings may influence what you pay for required insurance and how favorable the terms and conditions of contracts are for your company.
Trade credit insurance covers a supplier of goods and services against the risk of non-payment by its customers because of wilful default or insolvency. When trade credit insurance is withdrawn, it can be very difficult for the customer business to escape its ramifications. For businesses that routinely extend trade credit to relatively high-risk buyers, the cost of invoice financing can add up quickly.
Accounts receivable insurance (or trade credit insurance) protects your business against losses caused by the inability to collect payment from a customer. Dealing with foreign buyers could be tricky, risky and lead to profit loss or even a non-payment that might cost your company to shut its doors. Trade credit insurance is a dynamic product where cover levels adapt regularly to economic conditions.
It can be of great help in the growth of sales by allowing the secure development of new buyers, new markets and the credit extended to a buyer. If you decide that trade credit insurance could help your business to thrive, well take you on to a full review. With reduced credit risk, your company can expand existing markets and establish new ones with greater confidence.
Trade credit insurance protects manufacturers, traders and service providers against losses from non-payment of a commercial trade debt. Whether trading with established customers or seeking new markets, a company can use trade credit insurance to protect its cash flow and balance sheet against the unexpected shock of non-payment. Trade credit insurance covers a seller against the risk of non-payment by its customers arising due to wilful default or insolvency.
Trade credit insurance usually covers a portfolio of buyers and pays an agreed percentage of an invoice or. Financing your insurance premiums gives you the flexibility to use your working capital more effectively. It is also known as debtor insurance, export credit insurance and accounts receivable insurance. Trade credit insurance acts as a comprehensive credit management tool and can help prevent losses from occurring.
Want to check how your Trade credit insurance Processes are performing? You don’t know what you don’t know. Find out with our Trade credit insurance Self Assessment Toolkit: